SUMMARY Alveolar epithelium in lung parenchyma plays a pivotal role in protecting lung from inhaled particles/chemicals and respiratory infections. Therefore, the regenerative capacity of the alveolar epithelium is critical for recovery from these insults in order to rebuild the epithelial barrier and restore pulmonary functions. Alveolar epithelium is composed of alveolar epithelial type I cells (AECI) and alveolar epithelial type II cells (AECII). The renewal of AECI is considered to be depend on AECII, the alveolar epithelial progenitor cells, which differentiate into AECI. Thus AECII are essential in the rapid regeneration of the alveolar epithelium in response to injury. Host immune responses are known to cause lung injury during bacterial pneumonia and may also play a role in regulating repair and regeneration. we have uncovered a previously unrecognized role of T cells on regulating AECII differentiation capacity during bacterial pneumonia-induced lung injury and repair. Using a combination of genetic lineage tracing, flow cytometry, and immunostaining, our preliminary studies show that mice infected with Streptococcus pneumonia Strain T4 (SpT4), the most common pathogen of community-acquired pneumonia, had injuries exclusively in the lung parenchyma, with loss of AECI and AECII and increased infiltration of immune cells. This was followed by alveolar epithelial regeneration via differentiation of pre- existing Surfactant Protein C (SPC)- expressing AECII into AECI. This increase in AECII-to-AECI differentiation was correlated with up-regulation of nuclear protein levels of Yap and Taz in AECII and rapid resolution of T cells in lung alveoli. Mice that lacked Yap/Taz specifically in AECII exhibited diminished AECII-to-AECI differentiation, indicating the essential role of Yap/Taz in AECII differentiation. Furthermore, we found that AECII-to-AECI differentiation was substantially inhibited when AECII were co-cultured with CD4 or CD8 T cells in both murine and human model systems in vitro. After SpT4-induced lung injury in mice, persistent T-cell response in lung alveoli caused dramatic inhibition on AECII-to-AECI differentiation and decreased alveolar epithelial regeneration. We identified that CD4/CD8 T cells functioned, in part, by suppressing Yap/Taz nuclear activity in AECII. Based on these preliminary studies, the central hypothesis is that persistent CD4/CD8 T-cell response inhibits AECII differentiation capacity through down-regulation of Yap/Taz nuclear activity in AECII. Immunomodulatory strategies aimed at accelerating resolution of CD4/CD8 T cells in the lung will promote AECII-to-AECI differentiation and alveolar epithelial regeneration. This proposal aims to define the mechanistic role of CD4/CD8 T cells in regulating AECII function by investigating the mechanisms underlying CD4/CD8 T-cell regulation on AECII-to-AECI differentiation in an experimental bacterial pneumonia mouse model, and an in vitro co-culture system of AECII with T-cell subset from both human and mouse. We will also examine the potential of T-cell therapy in promoting AECII-to-AECI differentiation and alveolar epithelial regeneration in an animal model.